Post by
nflyby on Sep 15, 2022 5:30pm
AGM 2022 overview as promised
I’m not writing very often, but I read most of the post and as always I would like to start by thanking all of you who contribute frequently by providing valuable information and well-spoken opinions. This board really is awesome and sincerely one of the best.
Here is my take of the last AGM. A short resume as there is barely anything worth mentioning since it is for the most part information that we already know. Matheo01 and Montreal1010 were also there with me, feel free to add anything else if you remember something more.
To begging with, for those of you who were not able to attend this year, you haven’t missed much.
The AGM took place in the Fasken office this year. They started with the usual formal procedures of voting / re-voting the different board members. The result is what has been posted in yesterday pr. All of that was pretty much already settle from votes previously received electronically.
I was then expecting a presentation of some sort concerning the latest developments and forthcoming ones like we used to see in previous in-person AGM, but none of that. They didn’t prepared or show anything, instead they opened the floor for questions right away. If none of the shareholders present would have asked something, the AGM would have ended there. It was a bit surprising and somewhat a bit lame in my opinion.
Nonetheless I must say that I did appreciate the fact that the entire board of directors, management and M.Patrick Laperrire were present at this AGM, I congratulate them for doing this. I have assisted most of the AGM for the last 12 years (beside covid) and I can say that for the first time, it felt to me like we’re starting to look like a real company. Even if they haven’t said much, it felt like we are ready to play at another level (just my opinion from the vibe that I got).
Even if I would have appreciated a better presentation on their part, I understand that we were a very, very small group of investors assisting. We probably were about 10 shareholders in the room and there was no bigger players or brokerage firms like in some past years, they probably expected that. That been said it was at least nice to be able to ask some questions for which they tried to answer as best as they legally could. It was also possible to talk individually with every board members. I wish I would have been able to talk with everyone but the time was missing, they had to clear the room at one point and we had to leave. Still it was nice to have JSL, Eric, DR Haber and M. Laperrire point of view face to face.
Here are the topics that were mostly discussed.
1- Concerning the future deal with a potential partner.
When we first started negotiation with Helm (a lifetime ago…) they were looking at giving 25% of Rose for 25% of the capex (roughly 100m$) and the rest with dept., loan, dilution
After Helm, at the end of 2019, I remember JSL telling us that they were looking at financing the construction with a 50% equity 50% dept, loan, dilution (if necessary at a maximum of 200m shares) The equity part was for about 25% stake in Rose, not CRE, for roughly 170-200m$.
JSL said that it is still the way they are looking at making a deal.
The numbers would probably change as the lithium prices are higher and the project is worth a lot more now.The companies with whom they have discussion also have analysts and they are aware of what the company / project is worth. It is a question to come up with a consensus between the actual market cap and true valuation that has now triple to US1.9B.
The negotiations have switch to our advantage, with our new numbers and the actual lithium market situation we now have the upper hand.They are still looking at getting a partner with whom they will be able to work on different levels, for a long time. It is important for them to find the proper partner but they are not going to diminish the value of the company to do so. They don’t have too, there is too much interested at this point.
JSL didn’t want to give a number on a possible dilution (If dilution there is) as they also remain open at a possible full equity deal if the right one would come. I don’t think we should read too much in this but he gave an example. If a partner would offer to finance the entire project (400m) for 10% of the company (CRE) not just Rose, they could consider it as it would be much easier.There is many possible options and they don’t want to limit themselves on one at this time.There is many different parties interested with whom they have advance discussion and it is also possible that new players will come once we are fully permitted.
JSL also added that they are open to any kind of deal, even selling the entire project to a bigger player if the price was right. No door is close, everything is possible and it will be done with the best interest of the shareholders in mind. (I’ll believe it when I see it…)
Management said that once we have the permits, a deal with a partner won’t happen in a week, but potentially within a month, if not, very much possible within 3 months and absolutely within less than a year.
2- Do we expect to have to do another PP in a forthcoming future?
R: There is no other PP needed, even if it takes more time to get our permit, we have sufficient funds to last many years if need be.
3- Considering the FS for phase 2 (Hydroxide converters)
Like many on this board probably, I was eagerly waiting for those numbers to come out. Unfortunately it is not that simple. There is apparently a lot of regulators policies here. As we know the Hydroxide converters have been separated from Rose and it has been for different reasons. For one it gives them more flexibility during negotiations. As an example, if a deal is done only on Rose the Hydroxide portion doesn’t automatically have to be included. Also the regulators would apparently not allow it either.Concentrators have a life spend of 30-40 years and rose only has a 17 years (at this time) if it would be annexed to Rose there would be a gap that would not make sense and the regulators would not accept it.
Unfortunately by separating it from Rose it seem to prevent them to release the FS on the Hydroxide portion at the moment. It is all technical and a question of legislation by the regulators apparently. Since the regulators are looking closely at everything that is said they are very careful at what they publish. My understanding is that CRE is considered a mining company at this time, to add the chemical portion would change variables / status and it is not suitable at this time. (More delays…) Bottom line, we should not expect to see a revise FS that includes phase 2 shortly, at least not before we have our permit and a partner.
4- Build of the mine
Been in September already, I believe many of us are wondering if the build will be able to start in the winter.
JSL provided the same answer he did a few years back when they were saying at that time that we would most likely receive our permit by the end of that year…
It is definitely possible to do some portions of the construction in the winter such as the digging and other preparation but it won’t be possible to do everything. Assuming that we get our permit within few weeks/months they expect to respect the actual timeline and be in production within 24 months.
Even if post-covid there is shortage of staff and equipment, they are working on those aspects and don’t foresee any problem at this time. We won’t need 250 people right at the start and when the time will come, some of the work force will come from the Cree community that is eager to move ahead.
They are confidently moving towards that goal as we can see in their recent job posting.
The new Vice-President Engineering for the construction and reliability, Yves Perron was present during the AGM, but I didn’t have time to talk with him unfortunately.
5- Concerning the drilling campaign
The drillings are well undergo and from what we understood, we might be able to get some results within few weeks. That been said JSL was very cautious not to give specific delays has they remain uncertain on how they will present it. They might present small batches at a time or the entire drilling program at once (doubtfully). They also might present the result first without integrating it right away to the FS as it would require to redo many different calculations. It will be done eventually, but possibly not at first. Once they are ready to make it officially part of the FS the process could take about 3 months.
6- Concerning the permit situation
Well what is there to say really, they said that they are as tired as we are with the lengthy process. The permit is the key for everything else to unfold and we are presently at the mercy of Comex.
Management said that they have no idea why Comex is saying that Rose is a complex project and they have not been told any reason as to why there has been such a delay. They have not received any more question or any comments from Comex. In fact they haven’t had any communication with Comex since the last set of questions many months back. They are patiently waiting for them to give their recommendation. According to management there is no issue at any level and certainly none with the first nation, in fact the Cree community is ready and patiently waiting to move forward with this project.
To each his own as to who is telling the truth, the minister, Comex, management? I doubt we’ll ever know... The positive side is that we probably are at or next to the finish line. Management is really confident and ready for the next step. (Yet again, I’ll really believe it when it happens…)
We also discussed further permit situation in the case we expend the resources. Management said the same thing as they already told us in the past. If we use the same infrastructure of rose only permits for the new pit should be needed and that should take much less time, potentially one year. If we would to double the life of the mine, that would be different as it would require more than just permit for the new pit (pits) and longer delays as we all know.
7- What is the plan to increase the SP?
The lack of promotion among the lack of communication have been my biggest frustration with this company for years and management is well aware of it as it is something that I talk about most of the time that I have the chance to exchange with management.
To me it is just absurd that we are trading so low compare to our peers. Management is well aware of this and they are also very frustrated by this situation as they are shareholders as well. They said that our patience will have its rewarded, it is only a question of time (permit…)
For one part Eric talked about the NPV, he mentioned that the permit and other milestones (partner, financing, etc) will obviously de-risk the project and that analysts (and the market) will likely lower the discount rate when doing their calculations wish will most likely increase their SP target. Currently the after-tax NPV sits at close to $2,5B CAD. There’s a table in the Q3 MD&A on page 17 that shows the NPV at different discount rates, at 5% the after-tax NPV jumps to $3B…
I was also happy to hear M.Laperrire’s opinion. They are aware that we might not see all the efforts that are put behind the scene but he assured us that they are constantly working to increase our visibility. Their focus is mostly, not to say entirely, on the institutions. They are meeting institutions all over, here and abroad. They don’t seem to believe as much in the retail side.They seem to believe that retail is ok but not sustainable on the long term if it is not back by institution buying from the bottom-up.The stock could easily go to 3$ in a matter of days but it probably wouldn’t stay up just with the retail side.
There is a lot of sense in their explanation but I personally think that they are really underestimating the retail side especially the US side. M.Laperirre is open to listen to ideas for promotion if anyone wants to share good ideas, his door should be open for a conversation, don’t hesitate to contact him if you have something to propose.
To continue with the institution part, M.Laperrire was explaining that when we are in the 250m to 500m market cap range, like now, it is very difficult to have a sit down with institution. In the small cap world they almost have to beg to have a sit down. Once we will reach 500m, more interesting door will open, portfolio managers of certain institutions will be a lot more interested in meeting them. At 800m many institutions have the obligation to take a look at the project and even more doors will open. At 1B + they will have access to most if not all large funds and institutions and it will be a total different game.
At the moment even if we are a small cap company, there is a lot of interest from institutions but most if not all are waiting for the permit to arrive. Until that happens very few seem to want to get in. They don’t mind paying twice the price if when they get in it is with the guaranty that the permits are there.
We discussed the possibility to upgrade to a higher stock exchange. They said that we are definitely going to the TSX, they are already working towards that, it is just a question of meeting the minimum requirement. It will be done when we are able to do it. They are also considering other exchanges such Australia and others (no confirmation on anything in that regard)
As for the USA, it remain a future possibility for sure, but they don’t consider at this time that it would be to our advantage. It cost a lot of money just to be listed on the Nasdaq (1-5 million / year if I recall properly), just to pay for all of what is necessary. They have look around and don’t find that it has been successful for some player in our industry such as Nouveau monde as they say.
They also said that at the present time there is not a lot of institution or investment funds that have lithium in their portfolio in the USA. The ones that might are able to trade on our Canadian market apparently. According to them, the EV market and infrastructure haven’t really pick-up yet in the USA. Interest is getting bigger but they are still behind. We should eventually see a big turnaround in this situation with the arrival of the F-150 lightning and other models that are slowly starting. When the interest picks-up it should go very fast and probably at that time the institutions and investment funds will have a larger interest. Having an institutional background in mind it is probably then that management will consider a better USA exchange.
M.Laperrire agreed that we might be trailing behind in term of exposure and that we might not be known enough, they are working on it. They are also aware that for some of us that invested 8-12 years ago with an average between 0.30 to 1 $ it is not a very nice investment so far considering the risk factor. They are grateful for our patience and reiterated that we will be greatly rewarded for that patience.
Very good things seem to be around the corner for us. I know we have been saying the same thing for ever, but the lithium market is different now. Let’s just hope this ridiculous permit saga is just about to end and that management will deliver in their so call ‘’best shareholders interest in mind deal’’ with a partner. After that sky is the limit (as long as we get rid of this nonsense manipulation…)
To each his own, but I personally not buying the latest uptrend just before the AGM, not sure it will last, like many times before the price have gone up approaching specific potential millstones dates and then it retracted. Hopefully not this time but I have been burned too many times to be excited by this. That been said I like our potential very much and I liked what I have heard from what seems to be a very competent team that CRE has built up. Once we have the permit, no more excuses, CRE better deliver!!!!!
I’ll be waiting among many others I’m sure for this long overdue great reward…
Good luck to all.